Doximity shows there’s riches in niches

Facebook dominates social networking with 2.9 billion monthly users, but Doximity (DOCS.N) and its $7 billion initial public offering shows there’s room for more specialist clubs. The network for doctors only has 1.8 million members, but that equates to four out of five U.S. physicians. Moreover, it’s highly profitable and hard to copy.

While Doximity makes some money from recruiters and telehealth, 80% of its revenue comes from ads paid by pharmaceutical firms and hospitals. Revenue increased 78% last year, and earnings rose about 70% to $50 million. The company thinks marketing by drugmakers is a $7.3 billion opportunity. Investors are counting on it capturing much more. After a more than 60% increase in its shares on Thursday, it was trading at over 100 times trailing 2020 earnings.

What it lacks in size, Doximity makes up for in barriers to entry. Laws on handling medical information, and verification of doctors means it will be hard for rivals like Microsoft’s (MSFT.O) LinkedIn to steal its business. Investors may therefore be wagering that at some point, they’ll buy it instead. That would make Doximity a bet on a future transplant. Reuters